Government has already allowed reimbursement of service tax on about 19 services used by exporters while selling goods overseas.
The newly formed committee to look into problems faced by exporters is likely to discuss reimbursement of service tax at its first meeting, which is expected to be held this week. The central government has already announced setting up this committee to reduce delays faced by Indian exporters.
The committee will also look into issues related to speedy reimbursement of the terminal excise duty a measure announced as part of the first stimulus package in December 2008.
The government has already allowed reimbursement of service tax on about 19 services used by exporters while selling goods overseas. These include commission paid to foreign agents whose services are subscribed by exporters to book orders with overseas clients.
However, a list of 16 services used by exporters is not reimbursed. These include service tax paid on bank charges, packaging services, travel agents services (see chart).
The committee will take up issues related to reimbursements of service tax for exporters on services, which are yet to be given, said a government official in the know.
The committee headed by the finance secretary has Revenue Secretary PV Bhide and Commerce Secretary Gopal K Pillai as members.
If the remaining services are allowed for reimbursement, the Indian exporter will be able to add on some competitive advantage to the goods which are being sold in the international market, said a foreign trade expert. However, an estimate of savings that could accrue from reimbursing taxes on these 16 services is not estimated.
Indian exports dipped for two consecutive months in October and November, while initial estimates available with the commerce ministry showed that overseas sale of Indian goods in December 2008 is also likely to contract.
Government officials blame the waning demand from foreign markets like US and Europe to this decline. An exporter reported that on his recent visit to Europe, he found that the client was yet to sell products that were bought in June. Warehouses in Europe are stacked with products that were exported from countries including India as no one is buying them, a government official said.
Trade experts call for measures that would ensure that Indian exporters do not have to shut their production units. Exporters could be temporarily allowed to sell goods, made from duty-free imported raw material in the domestic market. This may put some domestic industries, which do not get duty free imports for manufacture of goods, at disadvantage. But at least this will ensure that factories run by exporters do not shut down, said KT Chacko, director, Indian Institute of Foreign Trade.
Meanwhile, indications from markets like the US continue to paint a grim picture. A report prepared by advisory firm Dun & Bradstreet shows that bankruptcy filings by US companies have more than doubled in the two years ending 2008.
D&B Research reveals that the Chapter 11 filings for commercial businesses have increased from approximately 3,600 in 2006 to an estimated 7,900, registering a 117 per cent rise, while Chapter 7 filings have increased from approximately 11,400 to an estimated 27,800 during the same period, a rise of 144 per cent, a release said.
According to D&B, this has a direct bearing on apparel, transport equipment, chemicals as well as jewellery exporters from India.
Govt releases Rs 800 cr to help Indian exporters
The government today released Rs 600 crore for reimbursement of pending Terminal Excise Duty and Duty Drawback to exporters, a Commerce Ministry release said. In addition, the government also released Rs 200 crore for reimbursement of Central Sales Tax for units supplying goods to 100 per cent Export Oriented Units.